News of the Week

Funding Status

Wave 8 for FY 2013 will be released on Wednesday, July 10, 2013, for $7.4 million.  Funding is currently being provided for Priority 1 services only.  Cumulative funding for FY 2013 will be $198 million, well below last year’s level by now.

Last year, the SLD did not release Wave 1 for FY 2012 until July 10th (due to a delay in FCC approval of PIA procedures), but the first wave was for $646 million — over three times higher than where we are at this point in FY 2013.  The comparison for the number of applications funded by July 10th is 23,800 for FY 2012 versus 14,267 this year.  The slowdown appears to be driven by a reduction in PIA staffing and the continued review of previous years’ applications.

FY 2013 applications which were filed online and on time, but were only certified during the grace period ending May 15th, have now been moved into the “Certified - In Window” status.  Receipt Acknowledgement Letters (“RALs”) for these applications were mailed last week, and funding request data is now available in the SLD’s Data Retrieval Tool (“DRT”) and in E-Rate Central’s Quick Search (see our newsletter of July 1, 2013).  Applications which were not certified, or were not filed with Item 21 attachments, by May 15th will be considered incomplete and will be denied by USAC.  The SLD will be sending Out-of–the-Window letters to late filers within the next two weeks (opening a 60-day window for those wishing to appeal).

E-Rate 2.0: Early Proposals and Comments

As noted in our newsletter last week, the next open FCC meeting, scheduled for July 19th, includes an agenda item concerning the planned release of what is widely expected to be a broad Notice of Proposed Rulemaking (“NPRM”) to modernize the E-rate program — an update often referred to as “E-Rate 2.0.”

It is not yet clear whether the NPRM will propose concrete changes to the program, or whether it will more generally solicit suggestions for changes.  What is clear is that many parties — the White House, the Senate, public interest groups, and the FCC itself — have publicly recognized that changes are needed to address the E-rate funding shortfall and the schools’ increasing requirements for much higher speed broadband connections nationwide.  In particular:

• In June, President Obama outlined his new ConnectEd initiative including additional funding for E-rate with a five-year goal of connecting 99% of students to the Internet at a broadband speed of at least 100 Mbps (and eventually 1 Gbps) per school (see the ConnectEd fact sheet and our newsletter of June 10, 2013).
• Senator Jay Rockefeller (D-WV), Chairman of the Senate Committee on Commerce, Science, and Transportation, has been soliciting and receiving commitments from FCC Commissioners (and the new nominated Chairman) to support E-Rate 2.0 modernization.
• The Leading Education by Advancing Digital (“LEAD”) Commission, working closely with the FCC and the Department of Education, has proposed a five-point "blueprint" to:
  1. Solve the infrastructure challenge by upgrading the wiring of our schools.
  2. Build a national effort to deploy learning devices and courseware.
  3. Accelerate the adoption of a digital curriculum.
  4. Embrace and encourage model schools.
  5. Train teachers on the use of information and communications technologies.
• FCC Commissioner Rosenworcel (a former staffer for Sen. Rockefeller), with recent support from Commissioner Clyburn (currently the acting FCC Chairwoman), has been actively pushing for early adoption of high level reforms to:
  1. Raise the funding cap.
  2. Set clear broadband capacity goals.
  3. Encourage public and private partnerships to develop more cost-effective technologies.
  4. Streamline the E-rate application process.
  5. Encourage broadband adoption at the home and study the effectiveness of school hot spots.

Without waiting for the release of the FCC’s NPRM, two parties have already submitted comments to the FCC calling for additional funding and proposing alternative program revisions.  In particular:

• Funds For Learning (“FFL”) has been promoting a basic change in the funding mechanism to limit applicant funding to a per student cap.  FFL argues that its proposal would (a) keep current discount levels and eligible services, (b) eliminate “unlimited” funding requests and allow applicants access to a “meaningful” amount of E-rate support each year, and (c) permit applicants to use their funding for Priority 1 and/or Priority 2 services.
• The State E-Rate Coordinators’ Alliance (“SECA”) recently submitted a white paper proposing broader access to Priority 2 funding.  SECA recommends (a) lowering discount rates for Priority 2, (b) using a single aggregate discount for all district schools, (c) narrowing the list of eligible services, and (d) establishing rolling access to Priority 2 funding over multiple years for all applicants.

The major problem that the FCC would have in implementing either of these proposals — or any other for that matter — is two-fold.  The first is that without a major increase in funding, any change in program structure is likely to create a large number of both winners and losers.  Potential losers tend to be the most vocal.  The second issue is that new proposals often seem attractively simple in concept, but become increasingly complex as implementing procedures are explored in depth.  For example:

• FFL’s per student cap sounds fair until a wide range of adjustments are considered to offset true differences in costs, whether they be the remoteness of many districts in Alaska or the high constructions costs (including prevailing wage requirements) in major cities.  The FFL proposal also creates problems for the funding of state or regional consortia which would have to somehow share the available per student funding of individual applicants.  This may be particularly problematic since the FCC appears to see consortia as a major vehicle for effectively supporting large-scale broadband deployment.

• SECA’s rolling funding proposal would assure that all applicants receive Priority 2 funding at some time in perhaps a 4-5 year cycle, but makes planning difficult for most applicants, and perhaps almost impossible for new schools whose greatest needs are in their first year of operation.

If the FCC does release its NPRM this month, the rest of the year should be interesting.  Comments on major NPRMs typically are due 45-60 days after publication in the Federal Register, with reply comments due 15-30 days thereafter.  This would suggest a due date for reply comments sometime in the October timeframe.  The last important E-rate NPRM — but one addressing less controversial issues — was issued on an accelerated (45 + 15 day) comment cycle in May 2010.  It led to the issuance of the Sixth Report and Order (FCC 10-175) in September, just in time for the key provisions to become effective for FY 2011.  This time around, with a later start and potentially more significant changes, we would not expect any major changes earlier than FY 2015.

E-Rate Updates and Reminders

FCC Releases Draft ESL for FY 2014 for Comment:

The FCC released a draft of the proposed Eligible Services List (“ESL”) for FY 2014 (DA 13-1513).  Comments are requested by August 2nd and reply comments by August 19th.

Unlike last year, when the FCC made a major change by adopting a consolidated listing of telecommunications and Internet services to simplify the Priority 1 Form 470 filing process, this year’s draft merely proposes a few “clarifications.”  The most significant clarification involves web hosting which is deemed eligible only in support of a school’s own website.  This means that other web-based services, which obviously involve a degree of web hosting, are not eligible at all.  Specifically, the FCC proposes “to clarify that eligible features available through a hosted website are not eligible for E-rate support as stand-alone offerings.”  In addition, the FCC proposes “to clarify that applicants may seek E-rate support for web hosting services purchased from a single provider, but may not seek E-rate support for services purchased from multiple web hosting providers.”

As a general rule, the FCC does not utilize the draft ESL comment process to consider major changes in product and service eligibility.  This may be particularly true this year when significant eligibility issues may be addressed in the E-Rate 2.0 NPRM discussed above.

Online Form 470 Available for FY 2014:

The default funding year indicator on the SLD’s online Create New Form 470 tool has been updated to FY 2014.  An SLD Special Edition News Brief dated July 1, 2013, warns:

If you have already filed an FCC Form 470 for FY2013 and noted in Item 13 that you intended the form for FY2014 services, remember that you cannot cite this form for non-contracted services provided under tariff or on a month-to-month basis. For these services, you must file an FCC Form 470 featuring FY2014 in Block 1, Item 2.

SLD Fall Applicant Training Schedule:

The SLD has scheduled eight one-day applicant training sessions this fall from late September through early November.  As of last Friday, the Washington DC and Los Angeles sessions were closed, and registrations were being accepted on a waiting list only basis for Atlanta, Houston, Newark, and St. Louis.  Regular registrations are still being accepted for Minneapolis (10/15) and Portland (11/7), but only a total of 40 spaces are still available.

SLD News Brief:

As a result of the 4th of July holiday, the SLD did not issue a News Brief last Friday.